Net Stock Issuance Anomaly and Cash Flow Explanation: A Research Note

Posted: 28 Apr 2018

See all articles by Dharmendra Naidu

Dharmendra Naidu

Monash University - Department of Accounting

Farshid Navissi

Monash University

Kumari Ranjeeni

Monash University - Department of Accounting

Date Written: August 17, 2017

Abstract

Prior studies show that net stock issuance is negatively associated with the cross section of future stock returns, reflecting a market anomaly. Our study provides empirical evidence on whether cash flow can mitigate such anomaly. Consistent with prior research, we initially provide evidence of the anomaly in our sample and that the anomaly persists in the presence of cash flow. We then decompose net stock issuance into stock issues and stock repurchases and find that the anomaly is only driven by stock issues but not stock repurchases and that the stock issues’ anomaly persists even in the presence of cash flow.

Keywords: cash flow, net stock issuance anomaly, stock issue, stock repurchase

Suggested Citation

Naidu, Dharmendra and Navissi, Farshid and Ranjeeni, Kumari, Net Stock Issuance Anomaly and Cash Flow Explanation: A Research Note (August 17, 2017). Australian Journal of Management, Vol. 43, No. 2, 2018, Available at SSRN: https://ssrn.com/abstract=3159915

Dharmendra Naidu (Contact Author)

Monash University - Department of Accounting ( email )

Building H, Level 3
Caulfield campus
Melbourne, Victoria 3800
Australia

Farshid Navissi

Monash University ( email )

Building H, Caulfield Campus
Melbourne, Victoria 3142 Vic 3145
Australia
+61 405 664941 (Phone)

Kumari Ranjeeni

Monash University - Department of Accounting ( email )

Building H, Level 3
Caulfield campus
Melbourne, Victoria 3800
Australia

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